Thursday, January 21, 2016

American Journal of Public Health
Published online ahead of print January 21, 2016
The Current and Projected Taxpayer Shares of US Health Costs
By David U. Himmelstein, MD, and Steffie Woolhandler, MD, MPH

Objectives: We estimated taxpayers' current and projected share of US
health expenditures, including government payments for public employees'
health benefits as well as tax subsidies to private health spending.

Methods: We tabulated official Centers for Medicare and Medicaid
Services figures on direct government spending for health programs and
public employees' health benefits for 2013, and projected figures
through 2024. We calculated the value of tax subsidies for private
spending from official federal budget documents and figures for state
and local tax collections.

Results: Tax-funded health expenditures totaled $1.877 trillion in 2013
and are projected to increase to $3.642 trillion in 2024. Government's
share of overall health spending was 64.3% of national health
expenditures in 2013 and will rise to 67.1% in 2024. Government health
expenditures in the United States account for a larger share of gross
domestic product (11.2% in 2013) than do total health expenditures in
any other nation.

Conclusions: Contrary to public perceptions and official Centers for
Medicare and Medicaid Services estimates, government funds most health
care in the United States. Appreciation of government's predominant role
in health funding might encourage more appropriate and equitable
targeting of health expenditures.

From the Discussion

Americans pay the world's highest health-related taxes. Yet many
perceive that US health care financing system is predominantly private,
in contrast to the universal tax-funded health care systems in nations
such as Canada, France, or the United Kingdom. By 2024, government
expenditures in the United States are expected to account for more than
two thirds of national health spending. This is nearly the same
proportion as in Canada, where official figures put government's share
at 70.7% (although this figure excludes modest tax subsidies for
supplemental private coverage).

Public funds help the vast majority of Americans pay for care, but these
funds flow through many different spigots. The funding streams for the
poor, the elderly, veterans, family planning, and public sector workers
are visible and hotly debated. Meanwhile, the hundreds of billions in
tax subsidies that disproportionately benefit wealthier Americans have
drawn far less public attention.

Although taxpayers fund the vast majority of health spending, overall
priorities for this funding are rarely discussed. Appreciation of the
magnitude of government funding might encourage more explicit,
appropriate, and equitable targeting of these expenditures as components
of a total health budget.

We often hear that we cannot afford the taxes to pay for a single payer
national health program - an improved Medicare for all. Yet we are
already paying most of the taxes that would be required; it's just that
they are relatively obscure and thus not recognized by most taxpayers.

By 2024, government expenditures will pay for more than two-thirds of
national health spending (up from 64.3% in 2013). "Government health
expenditures in the United States account for a larger share of gross
domestic product (11.2% in 2013) than do total health expenditures in
any other nation," according to this study. Our government health
expenditures alone are more than both government and private health
expenditures in any other nation. We are paying for a national health
program, but we are not getting it.

Most people are aware of the insurance premiums and out of pocket
expenses that they and their employers pay for health care, so they tend
to think that most health care spending is private. They are aware of
the payroll deduction for Medicare, but they do not tend to consciously
connect other taxes, especially income taxes, with expenditures for Part
B and Part D Medicare, Medicaid, CHIP, the VA system and other
government health programs. Also, totally out of mind is the portion of
personal and corporate income taxes that help pay for government health
programs - taxes that are built into the pricing of consumer goods and
services (not to mention that the cost of employee health benefit
programs is also built into consumer prices). (This may be double
counting for the tax tally, but higher health spending in the U.S. does
pass on opaque employer plan health costs to the consumer.) And one of
the largest silent taxes is the tax expenditure (tax subsidies) on the
federal, state and local level that help pay for private,
employer-sponsored health plans. Also, we are paying, through taxes, for
most of the health benefits offered to federal, state and local
government employees.

The roughly $300 billion we pay for tax expenditures for
employer-sponsored health plans (will be over $500 billion by 2024) is a
prime example of how dysfunctional our health care financing is. The
subsidies are credited in direct proportion to income - the higher a
person's income, the greater the subsidy. That is really unfair to
lower-income individuals and families who may be paying the same
insurance premium, directly or indirectly through forgone wage
increases, as the higher-income employees do, but at a greater dollar
amount than those with higher incomes after the subsidy is applied, and
at a much greater percentage of income. This is a highly regressive tax
policy.

The point is, we are already spending our taxes on the health care
system, and we can do it much more equitably through a well-designed
single payer program. Not only would we increase transparency, we would
also reduce inefficient spending by eliminating the private insurance
industry, saving more in premiums than would be the increase in taxes.
The next time someone says that we cannot afford the taxes for a single
payer system - clue him or her in. Let everyone know that it is time to
demand much greater value for the enormous amount of taxes that we are
already paying for health care.